2013 (12) TMI 508 - AT - Central Excise

Duty Liability u/s 11D of Central Excise Act 1944 - Processing of textile fabrics on job work basis Aid of power/steam on hot air stenter Held that - The respondents are job worker and are processing the manmade fabrics for merchant manufacturers - the provisions of Section 11D of the Act are not applicable in the case as there is no element of sale Following Gini Silk Mills Ltd. vs. CCE 2006 (11) TMI 405 - CESTAT, MUMBAI - Section 11D has to be given a wider meaning so as to include a merchant manufacturer who is the supplier of grey fabric to the processor and to whom the processor returns the processed fabrics, is not tenable for the reason that only in the case of a sale transaction there will be a buyer of goods, and the case of the department itself is that no sale was involved in the transaction between the grey fabric supplier (merchant manufacturer) and the processor. The provisions of Section 11D are inapplicable to units operating under Section 3A of the Central Excise Act, 1944, who are required to pay duty based on the capacity determined by the Commissioner of Central Excise, and not for every clearance effected - the provisions of Section 11D are not applicable to units operating under the compounded levy scheme, as they pay duty on the basis of production capacity/number of chambers of a stenter, and duty liability has nothing to do with the quantity of goods manufactured and cleared by them - For attracting the provisions of Section 11D of the Act there has to be sale - there is no evidence of sale and therefore, the provisions of Section 11D are not applicable no infirmity on the order Decided against assessee.

Issues:
1. Whether excess amount collected by the respondents represents excise duty or additional charges.
2. Applicability of Section 11D of the Central Excise Act to job workers.
3. Interpretation of the provisions of Section 11D in the context of job workers.
4. Application of precedents in similar cases to determine the liability under Section 11D.

Analysis:
1. The case involved a dispute where the Revenue contended that the excess amount collected by the respondents, shown as excise duty in commercial invoices, was recoverable under Section 11D of the Central Excise Act. The Commissioner (Appeals) held that the excess amount was not excise duty but additional charges related to various services. The Tribunal noted that the respondents were job workers processing fabrics for merchant manufacturers, and the excess amount collected did not represent excise duty. The Tribunal relied on precedents and upheld the decision of the Commissioner (Appeals) based on the absence of the element of sale in the transactions.

2. The key argument put forth by the respondents was that as job workers without involvement in the sale of goods, the provisions of Section 11D were not applicable to them. The Tribunal agreed with this contention, emphasizing that the job workers were not engaged in sales transactions, and thus, the provisions of Section 11D did not apply in the absence of a sale element. The Tribunal referenced the decision in the case of Mafatlal Industries Ltd. vs. UOI and the subsequent Tribunal and High Court decisions to support this interpretation.

3. The Tribunal analyzed the provisions of Section 11D, which require duty collected in excess to be deposited with the Central Government. The Tribunal highlighted that the job workers, in this case, were not involved in sales transactions and were processing goods for merchant manufacturers without a sale element. Therefore, the Tribunal concluded that the provisions of Section 11D did not apply to the respondents based on the specific nature of their operations as job workers.

4. The Tribunal referred to the case of Gini Silk Mills Ltd. vs. CCE, Thane, and the subsequent decision of the Hon'ble Bombay High Court, which emphasized the requirement of a sale transaction for the application of Section 11D. The High Court held that in the absence of evidence of a sale, Section 11D was not applicable. The Tribunal, aligning with these precedents, dismissed the appeal, finding no error in the decision of the Commissioner (Appeals) to set aside the demand and penalty imposed by the adjudicating authority.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) based on the nature of the transactions involving job workers and merchant manufacturers, determining that the excess amount collected was not excise duty but additional charges. The Tribunal found that the provisions of Section 11D did not apply to the respondents due to the absence of a sale element in their operations, in line with established legal precedents.

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